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37% of employers plan to cut permanent hiring due to Employment Rights Act – CIPD

74% of employers expect the Act to increase employment costs, and 55% think workplace conflict will rise because of at least one of the key changes. 

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37% of employers plan to cut permanent hiring due to Employment Rights Act – CIPD
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The Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) showed that 37% of employers plan to cut back on recruiting permanent staff due to one or more of the Employment Rights Act reforms. 

74% of employers expect the Act to increase employment costs, and 55% think workplace conflict will rise because of at least one of the key changes. 

CIPD called on the Government to keep consulting with employers and business groups, to compromise on measures still being finalised, and to make sure changes can be introduced without adding extra costs or legal risks for recruiting and managing staff. 

It also asked for a communications campaign to help employers, especially small firms, get ready for the new legal obligations, and for more support for Acas to help employers and small and medium-sized enterprises (SMEs) avoid disputes and tribunal claims.

The survey showed the net employment balance is +7 this quarter, the lowest outside the pandemic. 

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Among employers planning to hire fewer permanent staff because of the Act, the net balance is -5.

37% of employers plan to hire fewer permanent staff due to reforms to unfair dismissal, statutory sick pay, zero-hours contracts or trade union rights. 

CIPD said this could lead to more employment insecurity, with employers turning to temps and self-employed contractors to avoid higher costs.

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74% of employers believe their employment costs will go up because of the Act, with 17% expecting costs to increase “to a large extent”. 

This rises to 31% in social care and 28% in hospitality.

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55% think workplace conflict will rise. 

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Only 4% believe conflict will decrease because of new trade union measures and 11% are unsure about the impact on workplace conflict.

Ben Willmott, head of public policy at the CIPD, said: “Against a backdrop of low business confidence and already weak hiring intentions, our research suggests there is a real risk that the Employment Rights Act measures will act as a further handbrake on job creation and recruitment.

“In response, it’s important that Government acts to try and mitigate these potential negative consequences, including through meaningful consultation and where necessary compromise on key measures still to be decided in secondary legislation.

“We need to see a major communication campaign from Government to ensure smaller businesses in particular are aware of, understand and can prepare for the new legal obligations and know when they come in to effect.”

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Willmott added: “Just as important, the Government needs to ensure that Acas and the wider dispute resolution system have sufficient resources to help micro and small firms comply and avoid disputes and costly tribunal claims.”

CIPD said the Government’s estimate of the Employment Rights Act costing £1bn does not cover the full admin and operational burden. 

Employers will have to update policies, communicate with staff and train managers. 

Government estimates suggest it will take an hour or less for employers to get familiar with many changes. 

CIPD believes this is an underestimate, especially for updating payroll, policies and training.

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Willmott said: “The challenges employers face in understanding and getting ready for so many legislative changes over a short period of time needs to be better understood. 

“Giving organisations the time and support they need will be essential if these reforms are not to undermine employment growth or increase workplace disputes and employment tribunal claims. 

“Smaller businesses in particular will need clear advice and guidance to avoid unintentionally falling foul of the new laws.”

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